Why The Sun, but not the Studebaker?

Since the announcement that the Las Vegas Sun newspaper will be delivered as an eight-page insert within the Las Vegas Review-Journal each morning, the broadsides between rival columnists have been fast and furious.

Sun columnist Jon Ralston says he “can’t wait to be in the same paper as these guys.” He believes the difference of opinion between the rival papers is “the best argument for having that diversity every day.”

R-J columnist John L. Smith pines for the days when Hank Greenspun owned and operated the Sun, writing that there “was a nervous energy about the Sun that was irresistible, but that was a long time ago.”

But just why is the Sun being bailed out? The market has spoken; only 28,000 people subscribe to Hank’s legacy. Why do we have the Sun, but not the Studebaker?

The answer is a little known piece of legislation called the Newspaper Preservation Act of 1970. The NPA legalized Joint Operating Agreements (JOAs), which allow competing newspapers to share printing, advertising and circulation operations while maintaining separate news and editorial staffs.

What the NPA does is prop up a failing newspaper with the resources of its successful rival. Congress blessed this special antitrust exemption to insure that there would be two editorial voices in a particular market. Back in 1970, politicians believed that people who read newspapers voted. Thus: “Failing papers must be saved!”

“The whole purpose of the Joint Operating Agreement is to provide two voices for the Las Vegas community,” says Stephens Media Group CEO Sherman Fredrick. Brian Greenspun knows the JOA is the Sun’s life support system, allowing him to keep the paper afloat without having to tap into the considerable Greenspun family fortune.

Actually, the Sun would have died years ago if not for entering into the 1990 JOA with the Review-Journal. The R-J happily went along with the deal, being worried at the time that a well-funded, experienced competitor would buy the Sun and really compete for advertisers and subscribers.

With the Federal government’s blessing, the R-J became the only game in town for advertisers and subscribers; all they had to do was print the annoying liberal ramblings of Hank’s son Brian and other Sun columnists.

As Slate columnist Daniel Gross writes, “JOAs are a form of big government industrial policy meant to bolster the fortunes of also-ran newspapers in two-newspaper towns.”

So, what we have in Las Vegas is two big media companies—Stephens and Greenspun—forming a cartel through the force of government. “In essence,” explains Gross, “these giant corporations are permitted to fix advertising and subscription rates in a way that two competing plumbers, or restaurants, or magazines never could.”

This is of course not quite the “fair deal for everybody, including our readers and our advertisers” that the R-J’s Fredrick describes.

The reality is “daily news publishing is one of the most profitable businesses in the United States,” Matt Welch writes in Reason, “with average operating margins last year of 20 percent among publicly traded newspaper companies (compared to about 5 percent for the dreaded Wal-Mart).”

Predictably, the Newspaper Preservation Act has failed miserably. Since its enactment in 1970, nearly 300 daily papers have folded. Since 1990, when the Sun and the R-J tied the knot, the number of afternoon papers has dropped 35 percent. Of the 28 original JOAs, 15 have ended with one remaining paper.

The fact of the matter is, fewer people are getting their news from daily papers. Gross reports that the Pew Research Center found that only 30 percent of people born between 1962 and 1971 read the paper in 2002—a sharp decline from 1991 when 48 percent would have read the paper the day before.

Today, without Washington’s help, billionaire entrepreneur Philip Anschutz is developing a new newspaper business model. Buying the venerable San Francisco Examiner for $20 million, he converted it into a free tabloid. Early this year Anschutz followed up with the Washington Examiner, featuring politics that “lean in the conservative direction,” according to Reason’s Welch.